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Do Not Talk Pay with Your Competitors

Why It’s Dangerous to Pay Like “The Guy Across Town”

By Melissa Quade, CCP, PayScale.com I hear this from my clients all the time: “I just want to know what MY COMPETITOR 1 and MY COMPETITOR 2 are paying, so I can pay 5% higher.” “Can you make sure that I only get data from ALL OF MY COMPETITORS in this report?” “Why can’t I see which companies pay what in this report?” The short answer is: collusion. It’s a big no-no.

The longer answer starts with the Sherman Antitrust Act of 1890. Enacted in the early days of the industrialization of the U.S., the Sherman Antitrust Act was passed with the intent of preserving a competitive business environment. One way of achieving that was by disallowing price fixing (wage fixing). It is still in effect today, and has great implications where salary surveys are concerned.

Arguably, part of preserving a competitive business environment includes competing for talent. A potential violation of the law can occur when an organization has “discussions” (including online) with another organization that participated in a salary survey. With this in mind, there are limits to the exchange of information that is acceptable between companies participating in salary surveys.

It used to be that HR folks would spend a fair amount of time contacting competitors to get salary information. However, several cases were brought in the 1980s and 1990s that were meant to put a stop to this previously regular practice. Here are two examples:

– The Boston Survey Group regularly compiled and distributed salary data. Although data was technically “coded” to ensure confidentiality, the codes were openly traded.

– Hospital associations in Utah and Connecticut openly identified the providers of salary data they shared with each other.

In all of the above cases, employees brought lawsuits against the companies, and courts decided in favor of the employees. As a result, the U.S. Department of Justice and the Federal Trade Commission issued some guidelines commonly referred to as the Survey Safe Harbor Guidelines, which salary survey providers should follow in order to limit their exposure to liability to anti-collusion laws. Among other things, the Survey Safe Harbor Guidelines state that:

1. Data should be collected and provided by a neutral third party; 2. Data cannot reflect the identity or any other factor that may allow someone to identify a participating organization; and 3. Data results can only be shown in aggregate form.

Note that these are guidelines meant to help you comply with the law; they are not laws in and of themselves. And sure, the desire to know what your direct competitors are paying for your jobs is certainly understandable. So what is the harm in calling around to see if you can find out exactly what your competitors are paying? Look at it this way – would it be worth it to risk a friendly visit from the United States Department of Justice?

That’s not to say your competitors’ salary data won’t be included in a given report – it very well may be. It just means that no one should be telling you exactly who pays what for any given job. If they do, that act has suddenly opened up all parties involved to potentially major liability.

For some reason, the three items that are detailed above is different than what other articles of the same topic include. One of the items in other articles (missing from this article) is the need for data to be at least three months old. Is there a reason for the difference?

For some reason, the three items that are detailed above is different than what other articles of the same topic include. One of the items in other articles (missing from this article) is the need for data to be at least three months old. Is there a reason for the difference?